Rowan Callick, Asia Pacific Editor, The Australian

THE biggest business investment in the history of the Pacific region, the $15.6 billion ExxonMobil-Oil Search-Santos gas project in Papua New Guinea, came under fire yesterday from a leading Australian anti-poverty organisation.

Luke Fletcher, the policy co-ordinator of the group -- whose backers include the National Council of Churches and World Vision -- said that "it is very likely that the revenues will fall down into the black hole of corruption" unless the PNG government signs up to the World Bank-associated Extractive Industries Transparency Initiative.

He said that Australia's Export Finance Insurance Corp is set to provide hundreds of millions of dollars in support for the project, requiring approval from cabinet.

But he urged the Rudd government to consider carefully whether it wished to provide such funding at this stage, because "although the project will bring money to the PNG government, corruption will undermine the long-term economic benefits, not to mention the negative social and environmental impacts."

The economic impact study for the project, conducted by ACIL Tasman, estimated very significant benefits.

Jubilee concedes that there will be "a large increase in gross domestic product". But, it says, "the extent to which this windfall will be distributed among the people is questionable.

"Looking through a larger time-scale, the PNG economy has for years been dominated by this kind of large-scale extractive industry projects, and yet the country has seen very little genuine improvement of its standard of living."

Papua New Guinea was 148th of 182 countries listed in the UN's latest Human Development Index.

Jubilee said that "of the 7500 jobs that are estimated to be produced by the contract, only one fifth are to be provided by local PNG workers -- a general problem for the oil and gas sector in developing economies.

"The large influx of foreign workers during the construction phase is likely to have severe distorting effects on the local economy, both around Port Moresby" where the gas will be liquefied, and in the Highlands.

It says that although Oil Search, which owns 29 per cent, and Santos (13 per cent) of the project, and those who work for the companies will benefit, "the strategic dividends of a more stable and prosperous PNG far outweigh" such gains.

It says that "AusAID's two main aims in PNG" -- one of its two biggest fields of involvement, with Indonesia -- "are improving governance and fighting HIV, and both are likely to be severely undermined by the project".

http://www.theaustralian.news.com.au/business/story/0,28124,26232411-5005200,00.html